Contracts and externalities: How things fall apart

• 成果类型: Article
• 署名作者: Genicot, Garance; Ray, Debraj
• 署名单位: Georgetown University; New York University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2005.06.003
• 发表日期: 2006
• 页码: 71-100
• 关键词: multilateral externalities; Bilateral contracting; coordination game; exploitation; DELAYS

摘要

A single principal interacts with several agents, offering them contracts. The crucial assumption of this paper is that the outside-option payoffs of the agents depend positively on how many uncontracted or free agents there are. We study how such a principal, unwelcome though he may be, approaches the problem of contract provision to agents when coordination failure among the latter group is explicitly ruled out. Two variants are considered. When the principal cannot re-approach agents, there is a unique equilibrium, in which contract provision is split up into two phases. In phase 1, simultaneous offers at good (though varying) terms are made to a number of agents. In phase 2, offers must be made sequentially, and their values are discontinuously lower: they are close to the very lowest of all the outside options. When the principal can repeatedly approach the same agent, there is a multiplicity of equilibria. In some of these, the agents have the power to force delay. They can hold off the principal's overtures temporarily, but they must succumb in finite time. In both models, despite being able to coordinate their actions, agents cannot resist an invasion by the principal and hold to their best payoff. It is in this sense that things [eventually] fall apart. (c) 2005 Elsevier Inc. All rights reserved.